April 5, 2017 / 9:23 AM / 6 months ago

INTERVIEW-France's Engie bets big on small-scale LNG demand

* Small-scale LNG demand to reach 75 mln-95 mln T a year by 2030

* LNG used as fuel in ships, trucks to drive most demand

* Southeast Asia a key market for small LNG-to-power projects

* Industry needs more investments in small-scale infrastructure

By Mark Tay

CHIBA, Japan, April 5 (Reuters) - French utility giant Engie has tagged small-scale LNG projects as a key growth area for demand for the superchilled fuel amid a supply surplus that has pushed Asia’s spot LNG prices down 70 percent over the past three years.

“Small-scale LNG was considered by the group to be an area where we need to boost the activity,” Frederic Deybach, who works on Engie’s small-scale LNG programme, told Reuters on the sidelines of a gas conference in Japan.

Engie, the world’s largest independent power producer, is aiming to develop small LNG-to-power projects in island chains as investments slump in mega-power projects and demand stagnates in mature markets like Japan and South Korea.

Total global demand from small-scale LNG projects is expected to rise to between 75 million and 95 million tonnes a year by 2030, Deybach said.

That would rival in volume Japan, the world’s largest LNG importer at 83.3 million tonnes in 2016, according to the International Gas Union in a report released on Wednesday.

Small-scale demand will come from the adoption of LNG as a shipping fuel, accounting for 20 million-30 million tonnes a year, and a switch to LNG-fuelled trucks, contributing 30 million-40 million tonnes a year, with the remainder coming from island-based LNG-to-power demand, Deybach said.

ASIA‘S ARCHIPELAGOS

While LNG-to-power demand from islands is forecast to be the smallest component of the small-scale market, Deybach says its potential is underestimated.

“The demand can very well be in the range of millions of tonnes per annum, but that’s not going to be overnight. The difficulty with small-scale LNG (to power) is that you need to start small knowing that the market will grow,” he said.

In Southeast Asia, the firm is targeting countries such as Indonesia, Philippines and Myanmar.

“Indonesia (has) a lot of islands and in addition to that Indonesia is also a natural gas producer so that makes it even more natural for them to consider LNG for their power supply,” Deybach said.

Engie has already been participating in the different tenders launched by Indonesia’s state utility firm PT Perusahaan Listrik Negara (PLN).

“In Indonesia, the potential is there. It is going to happen but we just don’t know at what speed,” he said.

Another challenge the industry faces is the oversized floating storage regasification units (FSRU) that are the norm. FSRUs typically have around 150,000 to 170,000 cubic meters of cargo capacity, almost 15 times larger than what some of these projects require.

“FSRUs can contribute to small scale projects like any other type of LNG receiving terminal ... but there has to be investments too, into smaller storages, regasification and smaller facilities,” he said. (Reporting by Mark Tay; Editing by Tom Hogue)

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